Sale of shares or assets
Choose between buying and selling shares or buying and selling assets
One of the main diatribes that anyone who decides to buy or sell a company has is how to document the transfer:
is it better to make a sale of shares/participations (shares deal) or a sale of the assets/liabilities that the company has ( assets deal)?
Giving a synthetic answer, we could say that in general terms it is safer and therefore more beneficial for the buyer to simply acquire the assets.
While it will usually be the will of the seller (when his intention is to get rid of the business) the sale of the shares or shares, and not the mere transfer of some assets.
Buying and selling shares or assets. The simplest explanation.
Through the sale of shares (when the company is an S.L.) or shares > (when the company is a S.A .), there is a transfer of all the rights and obligations of the company.
So, the buyer acquires the assets (customers, real estate, machinery, brands, licences, etc.) but also liabilities (debts, fiscal or tax charges, labor charges, etc.).
When the object of the sale is a business unit or branch of activity, the parties can agree which assets or liabilities are included in the agreement and which remain in the original company. Thus, the buyer will only face the charges and contingencies associated with that specific activity.
However, in the sale of shares or participations in a company, the buyer must assume in the future all the obligations that the company had committed before the sale had become effective.
We must take into account that in the sale of shares, the company maintains the same condition without seeing its equity or composition of assets and liabilities altered.< /p>
The change in ownership of your shares does not affect your relationship with third parties or decrease the burden of your obligations.
To the extent that the transfer of a company includes “the sale of the whole”, while in the sale of a branch of activity it implies only “< em>a part of the whole”; the first operation can be implemented more easily, but the business unit or branch of activity requires an exhaustive definition of the assets and liabilities that are transferred, clearly determining those that are part of the agreement and those that on the contrary, they will continue to belong to primitive society.
This need to inventory the different elements that make up the object of sale is not found in the sale of shares.
Which is better, buying and selling shares or assets?
In both cases, whether it is one option or another, the buyer is always advised to carry out a prior contingency study (due diligence) to know in advance the fiscal, labor or any nature risks.
The possibility of making the final decision on the object of sale after having obtained the necessary information to know all the risks should not be denied.
The specific case will determine the most recommended option in each case, and on certain occasions the best decision will not be fully appreciated until the appropriate study has been carried out of risks.
Appropriate advice can clarify doubts about which option is more interesting, and of course translate into significant financial savings in the future.
We must take into account, on the other hand, that the choice between one formula and another is not always within the reach of those involved in the agreement, an asset is not always transferable without diminish their condition.
The circumstance may also arise, when we talk about the transfer of a branch of activity, that maintaining the rights contemplated in contracts with third parties requires the consent of clients, suppliers, intermediaries or agents of any nature.
Such prior consent will not be necessary if the change of ownership was already provided for in those contracts, but otherwise the client or supplier must consent to the change
It is essential to have considered the different scenarios before formalizing the sale, since we could subsequently find ourselves with the contractual termination of essential customers or suppliers by the change of ownership.
In turn, the transfer of shares or participations can be total or partial, since it could be that the seller gets rid of part of his quota of ownership, but not of its entirety.
In such a case, and regardless of whether the transferred share allows the buyer to control the management of the company, the coexistence between partners may be relevant information at the time to quantify the sale price or to agree on other agreements between the partners.
Conclusions on the sale of shares or assets
- In the sale of shares, the seller is the owner of the shares being sold, and the company is not a party to the contract. On the other hand, in the purchase and sale of a branch of activity, it is the company to which said activity belonged that appears as the selling party.
- In the purchase and sale of shares, all the assets and liabilities of the company are transferred. Also the charges and other obligations that affect the company even if they had not been contemplated in the contract or had not been the subject of negotiation.
- In the sale of a branch of activity, the assets and liabilities that are part of the transfer must be inventoried in the agreement.
- The purchase of a branch of activity or business unit is usually conceived as a less risky formula for the buyer, but in any case the appropriate choice should be analyzed based on the specific case.